Fairness of external ESG assessments: the financial foundation of non-financial reports

The article focuses on developing the solution to address the crucial issue of ensuring the fairness of external corporate ESG assessments. The research justifies the importance of financial metrics for assessing non-financial business aspects and the applicability of the KRESG index model, which reflects the level of a company’s exposure to technogenic ESG risks based solely on data from its financial statements. The proposed methodology aims to increase the objectivity and independence of ESG assessments conducted by external parties. The study is based on primary data aggregated by the author, including the values of financial reporting metrics and ratings from leading international ESG agencies (S&P and Sustainalytics), for 55 prominent public companies operating in the global energy sector and located in 20 different jurisdictions. The research methodology is based on regression and multivariate analysis, utilizing non-parametric testing and econometric modeling techniques. The study is based on an independent sample and verifies its components with validated statistical analysis tools, which ensures the authenticity and reliability of conclusions and judgments derived. The scientific novelty of the findings lies in evaluating the applicability of a proposed index model for assessing the degree of corporate exposure to ESG risks for companies operating in the international hydrocarbon energy market, based on companies’ financial data. The findings of this study expand and enhance the body of empirical knowledge, increasing the practical applicability and objectivity of third-party rating assessments of a company’s ability to withstand risks related to technogenic ESG issues. The findings will be of value for socially responsible investors in their decision-making process while selecting sustainable financing options, as well as to economists seeking to develop optimal algorithms for third-party ratings that ensure reliable and objective analysis results that may form the basis for futher research in this field.

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